Until some years ago, there would only be three
major mortgage loan types that would be available to a potential home buyer.
The buyers could have a conventional fixed-rate mortgage, a VA loan, or an FHAloan. Times are very different now. There are a wide variety of mortgage loan
types available, something that could not have been imagined until a few years
ago. We will discuss here some of the popular types of mortgage loans on offer.
Most
Popular Mortgage Loan Types
Fixed-Rate
Mortgages: This is
perhaps the oldest of them all. Today, one can opt from 5-year right up to the
50-year fixed rate loans, and all of them are fully amortized.
FHA
Loans: The FHA
or Federal Housing Administration mortgage loans have been insured by the
Federal Government through the mortgage insurance that has been funded into the
loan. The ideal candidates for the FHA mortgage are the first time house owners
as the down payment requirements are the least in this type of a loan and also
the FICO scores are not considered.
VA
Loans: The
VA Loan is a type of a government loan that is available to the veterans who
have served in the U.S. Armed Services and also in specific cases available to
the spouses of the deceased veterans. The requirements may vary depending on
the year of the service and also whether it was a honorable discharge or a
dishonorable one. The main benefit in getting a VA loan, if eligible for it, is
that the borrower need not put in a down payment for this loan. The loan is
also guaranteed by the Department of Veteran Affairs but is funded by
conventional lenders.
Interest-Only
Mortgages Types: It may
be a bit misleading to call a mortgage loan an interest-only mortgage as these
types of loans are not actually interest only, that is the borrower need to pay
only the interest on the loan. The so called interest-only loan types have an
option to make the payment for only the interest component for a specific
period of time. However, there are also some junior loans that are actually
interest only and need a balloon payment of the capital amount at maturity.
In addition to these very basic mortgage loans
available, there are also some hybrid options available in the market now. For
example, an option ARM loan is a
complicated form of mortgage. They are an adjustable rate loan, which is to say
that the interest rate fluctuates depending on specific conditions. As the name
implies, the borrowers for this type of loan can opt from a variety of payment
options as well as index rates. But one has to be aware of the minimum payment
option, which can even result in a negative amortization.
Another hybrid loan type is the piggyback
mortgage. This type of a loan financing may consist of two different loans: a
first and a second mortgage. The mortgages have the option to be
adjustable-rate mortgages or a fixed rate or even a combination of the two. The
borrowers actually take out the two loans and the down payment is less than 20%
so as to avoid paying the private mortgage insurance.
If you are looking into your loan options, please give us a call today. Horizon Lending Services is here to help you in any way we can.
